TAXES are an important source of government revenue to support development and provide various public services.
In Indonesia, the taxation system is based on tax laws that regulate the various types of taxes that must be paid by the public and the business world.
In Indonesia, taxes are classified into three parts or groups, which can specifically become collection institutions, based on their nature and targets or objects.
3 types of tax classification:
1. Types of Taxes Based on Collection Institutions
Based on the collecting institution, the types of taxes in Indonesia are divided into five types of taxes that must be known and paid, including Income Tax (PPh), Value Added Tax (PPN), Luxury Goods Sales Tax (PPn BM), Stamp Duty, Land and Building Tax (PBB), and Land and Building Acquisition Tax (BPHTB).
a. Income Tax (PPh)
Income earned in a year and taxed on individuals or business entities is called income tax (PPh). What is meant by “income” is the economic capacity that can be used to meet daily needs or increase wealth, whether sourced from within the country or abroad.
Simply put, income can be considered as profits or expenses obtained from a business, salary, gifts, and others. While income tax subjects are divided into two types, namely domestic tax subjects and foreign tax subjects.
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b. Value Added Tax (VAT)
This tax is often collected during commercial transactions or eating at restaurants. However, not everyone is familiar with Value Added Tax (VAT).
VAT is a tax levied on the purchase of Taxable Goods or the use of Taxable Services in the customs area (within the territory of Indonesia). Every purchase of Taxable Goods or use of Taxable Services will be subject to VAT, whether by individuals, business entities, governments, and others.
c. Sales Tax on Luxury Goods (PPn BM)
Every luxury item will be taxed and is categorized as Luxury Goods Sales Tax (PPN BM). Check the product category that is categorized as luxury goods to find out whether the item you have is a luxury item or not. Below are the categories of luxury goods products:
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- These assets are only owned by people with high incomes.
- These items are only used to determine social status.
- These items are not basic necessities.
- If used, it can endanger public health and morals, as well as disrupt public comfort and order.
d. Land and Building Tax (PBB)
If we own land or use land and buildings, then we are subject to Land and Building Tax (PBB). Initially, PBB was included in the central tax, but starting January 1, 2014, rural and urban PBB were included in regional taxes, except for PBB for plantation crops, forestry, and mining which are still included in the central tax.
e. Stamp Duty
Stamp Duty is a tax levied on the making of documents, such as notarized documents, agreements, property rights, and payment receipts. Stamps are printed and issued by the government.
f. Land and Building Acquisition Fee (BPHTB)
Land and Building Acquisition Tax (BPHTB) is a tax imposed on the acquisition of land or building rights.
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Like PBB, BPHTB is managed by the central government, but all revenue from BPHTB is handed over to and managed by the regional government sector, both provincial and district or city, and must comply with applicable regulations.
Taxpayers for BPHTB are individuals or bodies who have rights to land and buildings.
2. Types of Taxes According to Their Nature
Types of taxes, when categorized based on their nature, are divided into two, namely Direct Taxes and Indirect Taxes.
a. Direct Tax
Direct tax is a type of tax whose tax burden must be borne by a taxpayer and does not pass the tax burden on to other people like income tax.
b. Indirect Taxes
Indirect taxes are taxes whose burden can be shifted or borne by other parties. Examples of this type of tax are VAT and Sales Tax on Luxury Goods (PPn BM).
Indirect tax burden can be shifted from seller to buyer because its movement is in one direction from producer to consumer, it is called forward movement. However, if the tax burden shifts in the opposite direction, it is called backward movement.
3. Types of Taxes Based on Target or Object
Tax grouping based on targets or objects is divided into two types, namely subjective taxes and objective taxes.
a. Subjective tax
This type of tax is a tax that takes into account the conditions or circumstances of the taxpayer.
In determining subjective tax, objective reasons are needed related to physical conditions and are often called “bearing force”. Bearing force is the taxpayer’s tax ability following deducting minimum living costs.
The carrying force includes two elements, the first is the subjective element, and then there is the objective element. The subjective element includes all needs, both physical needs and moral and spiritual needs. While the objective element includes income, wealth, and costs or expenses.
b. Objective Tax
Objective tax is a type of tax that tends to consider or pay attention to the object that gives rise to the obligation to pay tax first, then look at the tax subject, namely from individuals or bodies. Simply put, objective tax can be understood as a tax that only pays more attention to the condition of its object. An example of objective tax is Value Added Tax.
Those are the types of taxes and their respective explanations that we must understand. (Z-3)
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